Rural Philippine Call Center Shows Promise of New Business Model

TANJAY, NEGROS, the Philippines—Little stirs except the occasional stray dog after midnight in Tanjay, a sleepy town on the central Philippine island of Negros. But one place is bustling.

Through the night, in a converted schoolhouse, dozens of agents handle queries from American clients in a unique experiment—the Philippines’s first rural call center.

The center’s youthful team has grown to enjoy their nocturnal routine, said 21-year-old Katherine Valdez, despite some disorienting effects. “We get an hour’s lunch break at 3 a.m.,” she said. “Or maybe it’s early breakfast.”

‘There are high-quality people in those provincial towns,’ said Butch Valenzuela, the president and CEO of Visaya KPO, which he launched in 2006. ENLARGE
‘There are high-quality people in those provincial towns,’ said Butch Valenzuela, the president and CEO of Visaya KPO, which he launched in 2006. TREFOR MOSS/THE WALL STREET JOURNAL
Outsourcing is the runaway success story of Philippine business. Second only to India in terms of scale, Philippine outsourcers just hired their one millionth employee, according to the Information Technology and Business Process Association of the Philippines, having started from scratch a decade ago. The sector posted revenue of $16 billion last year—6% of national GDP—and is targeting $25 billion by 2016, as Australian, British and U.S. companies entrust their customer services and back offices to Filipino teams who speak fluent English and come cheap.

The challenge is that companies are now struggling to hire qualified people in the industry’s main hubs, especially Manila, the country’s capital.

“We reached the point where 75% of college graduates were outside Manila, but 75% of the work was in Manila,” said Jose Mari Mercado, president and CEO of Information Technology and Business Process Association of the Philippines.

Historically, the mismatch has driven millions of skilled professionals to migrate to Manila and beyond.

The Tanjay center is an experiment in taking some jobs out of the urban centers, testing whether rural call centers—which have proven successful in India—can work in the Philippines.

In a year and a half, the center—run by Visaya Knowledge Process Outsourcing Corp., a small outsourcing firm based in Manila—has grown into the largest employer in a town of 80,000 people. Its near-100 workers—half of them urban migrants who jumped at the chance to move back home—field clients’ customer-service calls, and handle back-office tasks such as billing and invoicing, at about 70% of the cost of similar businesses in the capital. Meanwhile, wages—at roughly $335 a month plus health care—are about triple what most people in the town earn.

“I’d never heard of Visaya KPO, but because it was in Tanjay, I took a risk,” said Venice Manso, 26, who was working at a call center in Cebu City—about 100 miles northeast, on the island of Cebu—when she heard a new center was opening in her hometown. “It’s amazing to be close to home.”

The center’s success has industry leaders dreaming of replicating the idea in hundreds of other small towns across the Philippines.

“There are high-quality people in those provincial towns,” said Butch Valenzuela, the president and CEO of Visaya KPO, which he launched in 2006. A native of Negros, he sees the Philippine regions beyond the big cities—Metro Manila has around 12 million people, while Cebu City is just under 1 million—as a gold mine of untapped human capital. The outsourcing sector has already expanded into second-tier cities, including Iloilo and Bacolod, but even some of these may soon reach saturation, according to Mr. Valenzuela.

Mr. Valenzuela stressed that he sees the operation as a business opportunity. “This is not philanthropy,” he said.

Mr. Mercado said the Tanjay pilot project had proved the rural call center concept, but that the challenge would be finding enough foreign clients who were willing to outsource to small towns they had never heard of.

Visaya KPO’s call center has grown into the largest employer in Tanjay, a sleepy town of 80,000 people on the central Philippine island of Negros. ENLARGE
Visaya KPO’s call center has grown into the largest employer in Tanjay, a sleepy town of 80,000 people on the central Philippine island of Negros. TREFOR MOSS/THE WALL STREET JOURNAL
Tanjay is a modestly prosperous town by rural Philippine standards, thanks to its sugar-cane industry, traditionally the area’s only significant employer besides schools and other public services. It was also unharmed by last year’s supertyphoon, which plowed through the central Philippines farther north.

With its quaint family-run stores and smoky barbecue shacks, the town seems an unlikely outpost in the global knowledge economy.

The Tanjay center was spearheaded by Mr. Valenzuela, the head of Visaya KPO, and Benedict Hernandez, a senior executive at Accenture PLC, a global consulting and outsourcing firm with 35,000 staff in the Philippines. Accenture had already successfully piloted three rural call centers in India, and Mr. Hernandez told Mr. Valenzuela that his company was interested in trying something similar in the Philippines.

They soon zeroed in on Tanjay after learning about the empty school building. Communications were inadequate, but Philippine Long Distance Telephone Co. agreed to lay 40 kilometers, or 25 miles, of fiber-optic cable to hook its high-speed grid up to the town.

Visaya KPO had the Tanjay center up and running by March 2013, with Accenture its maiden client. Since then, three U.S. clients have been added, including medical and educational accounts, and the company aims to double its staff to 200 by mid-2015. Its upper limit may be around 800 agents, given Tanjay’s size, Mr. Valenzuela said.

The government also helped by declaring the Tanjay center a special economic zone so it could benefit from tax breaks.

“I’d like them to open it up to other rural areas,” said agent Hanna Rodriguez, recalling bitterly how her mother spent 26 years away from Tanjay, working in Hong Kong and Bahrain. “We have the talent,” she said, “and this way we get to experience the corporate world without leaving home.”